New South Wales Supreme Court CITATION : Rupchev v Callow & Anor [2007] NSWSC 576 HEARING DATE(S) : 1 June 2007 JUDGMENT DATE : 7 June 2007 JURISDICTION : Common Law Possession List JUDGMENT OF : Simpson J DECISION : (1) The plaintiff and the first defendant are to pay their own costs of the proceedings. (2) The plaintiff is entitled to be paid (from the proceeds of the sale of the Normanhurst property) interest upon the payments made by him pursuant to the mortgage, at rates prescribed pursuant to s 101 of the Civil Procedure Act 2005, from the date of each payment until the date upon which he was reimbursed therefor. CATCHWORDS : COSTS – claim for possession of land – third party mortgage – all moneys mortgage – loans advanced to one of two defendants secured by mortgage – defences to claim for possession – resolution of proceedings – compromises by both parties – each to pay his/her own costs – INTEREST – plaintiff's entitlement to interest on sums paid – Supreme Court rates LEGISLATION CITED : Civil Procedure Act 2005 s 101 Svjatoslav Rupchev (Plaintiff) PARTIES : Beverley Callow (First Defendant) Vladimir Rupchev (Second Defendant) FILE NUMBER(S) : SC 11861 of 2004 S Burley/P Arcus (Plaintiff) COUNSEL : R E Quickenden (First Defendant) N/A (Second Defendant) Goldrick Farrell Mullan (Plaintiff) SOLICITORS : Nash Allen Williams & Wotton (First Defendant) Plowman Legal (Second Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST Simpson J 7 June 2007 11861/04 Svjatoslav Rupchev v Beverley Callow & Anor JUDGMENT 1 HER HONOUR: This judgment concerns competing claims for orders for costs by the plaintiff and the first defendant; a claim by the plaintiff that costs awarded in his favour be assessed on an indemnity basis; and a claim by the plaintiff for an award of interest on certain sums of money to which he is, it has been acknowledged, entitled. 2 The substantive proceedings were commenced by statement of claim filed on 18 June 2004. The plaintiff is Svjatoslav Rupchev. The first and second defendants are, respectively, Beverley Callow and Vladimir Rupchev. Vladimir Rupchev is the son of Svjatoslav Rupchev. It is convenient to set out something of the history and background of the relationship between the parties. History and background 3 In October 1992 Vladimir Rupchev and Ms Callow began to co-habit in a de facto relationship. On 20 April 1998, as joint tenants, they purchased a property at 21 Redgrave Road, Normanhurst. The purchase was financed in an unusual way. The sum of $252,500 was advanced pursuant to a loan agreement by the St George Bank. The Bank did not, as might have been expected, take security by way of mortgage over the Normanhurst property. Instead, Svjatoslav Rupchev provided the Bank with a guarantee of the obligation of Ms Callow and Vladimir Rupchev. As security for that guarantee, the Bank took a mortgage over property owned by Svjatoslav Rupchev at The Comenarra Parkway, Turramurra. Ms Callow and Vladimir Rupchev then granted a mortgage over the Normanhurst property in favour of Svjatoslav Rupchev. The mortgage is of the kind commonly known as an "all moneys mortgage". 4 From time to time, from 1991 (this is, before, during and after the termination of the relationship between Ms Callow and Vladimir Rupchev) until 2002, Svjatoslav Rupchev advanced, by way of loan, various sums of money to Vladimir Rupchev. At least some, if not all, of these were for business purposes. According to the statement of claim, these loans totalled in excess of $600,000. 5 Ms Callow and Vladimir Rupchev occupied the Normanhurst property until July 1998, when the relationship came to an end and Ms Callow vacated the property. Vladimir Rupchev continued in occupation. 6 There followed extensive correspondence between Ms Callow and Vladimir Rupchev concerning the resolution of their financial affairs. On 21 March 2002 Ms Callow wrote to Vladimir Rupchev asking that the property be placed on the market for immediate sale. 7 By April 2002 Svjatoslav Rupchev had become embroiled in the controversy between the two. On 26 April 2002 he wrote to Ms Callow, referring to the terms of the mortgage of the Normanhurst property in his favour, and requiring Ms Callow to provide him with certain identified information to which he claimed, pursuant to the terms of the mortgage, to be entitled. On 3 May 2002 he wrote to her again. He referred to the possibility of a "forced sale" of the property, suggesting that the final outcome of such an event would be "very disappointing". In this letter he told Ms Callow that: "… indebtedness on the property as it stands is practically its full value …" 8 On that basis, he said that the property had no real value to either Ms Callow or Vladimir Rupchev. He told her that she was jointly and severally responsible: "… for all debts, guarantees and other financial accommodations covered by the Mortgage." 9 There was more in the letter, but this is sufficient for present purposes. The references to the indebtedness secured on the property, it is now clear, was a reference to the "all moneys" clause, and to the sums he had, at that time, advanced to Vladimir Rupchev – in excess of $600,000. It was accepted that the clause in the mortgage was capable of a construction that those sums were incorporated in what was secured by the mortgage – despite the apparent unfairness to Ms Callow. 10 On 12 June 2002 Ms Callow wrote to Svjatoslav Rupchev, inviting him to provide a detailed account of all moneys owing to him, and asking him to make the property available for immediate sale. 11 I do not propose to go into all of the correspondence between the parties. By October 2002 Svjatoslav Rupchev was ready to take legal action concerning the property, and had his solicitors serve upon Ms Callow (and Vladimir Rupchev) notices under s 57(2)(b) of the Real Property Act 1900. (These were later withdrawn, but substituted with fresh notices.) 12 Until about April 2002 Vladimir Rupchev, who continued in occupation of the property, made the repayments under the loan agreement to the St George Bank. At about that time he ceased making payments. Accordingly, in order to protect his own property against execution by the Bank under the mortgage it held on his Turramurra property, Svjatoslav Rupchev undertook that obligation. 13 On 17 December 2002 Svjatoslav Rupchev served on Vladimir Rupchev and Ms Callow a statement of claim (10034 of 2002) claiming possession of the property. It included a plea that: "The mortgage secured the advance of $252,500, as well as borrowings existant (sic) at the time of the mortgage in the sum of $82,087 together with interest accrued on that debt together with further advances from time to time made by the plaintiff to the defendant". Proceedings on that statement of claim were discontinued. 14 On 18 June 2004 Svjatoslav Rupchev filed the statement of claim which commenced the present proceedings. He pleaded the mortgage, and further pleaded: "6. It was a term of the Mortgage that it secured, inter alia, all moneys and amounts which at any time for whatever reason or circumstances, whether or not within the contemplation of the parties at the date of the Mortgage, remained unpaid to the Plaintiff in any manner and on any account whatever by the Defendants either jointly or severally." 15 He pleaded further that between June 1991 and September 2002 he had advanced various amounts "to one or both of the Defendants" totalling $623,778.48, and that interest of $88,930.51 thereon had accrued. 16 On 21 July 2004 Ms Callow, acting without legal representation, filed a defence to the statement of claim. The document is handwritten. Its content betrays Ms Callow's lack of legal training and expertise. However, she "agreed" that she had signed the mortgage, but stated: "I disagree that the mortgage agreement is legal." 17 She repeated this throughout the 14 or so pages of the document. There followed more correspondence between the parties. 18 On or about 5 November 2004 Ms Callow filed an amended defence, again acting on her own behalf. Although this document is typewritten, it again betrays her lack of legal training and expertise. 19 On 26 July 2005 solicitors for Svjatoslav Rupchev wrote to Ms Callow's solicitors offering a settlement which provided for sale of the property, payment of amounts outstanding to the St George Bank, and that the balance (after payment out of necessary costs and expenses) be distributed as to 50 percent to him, and 50 percent to be held on trust for Vladimir Rupchev and Beverley Callow. This, I assume, was intended as some form of compromise for his claim for repayment, out of the proceeds of the sale, of the sums advanced to Vladimir Rupchev, and said by him to be secured by the mortgage. 20 On 7 December 2005 a third amended defence to the statement of claim (by this time also amended) was filed by solicitors now acting on Ms Callow's behalf. This acknowledged that Ms Callow had signed documents: "… with the intention of securing an advance of funds from St George Bank in the approximate sum of $252,500 to purchase the property jointly with [Vladimir Rupchev]". However, Ms Callow denied that she intended to sign any document intending to mortgage her estate or interest in the property to the plaintiff. 21 At a later point in the amended defence a reference was made to Ms Callow's "plea of Non Est Factum". There is no antecedent plea of non est factum discernible in the defence unless it could be said (as it was said) that Ms Callow's denial of an intention to mortgage her interest in the property could be so interpreted. Ms Callow also pleaded estoppel against Vladimir Rupchev and claimed, under s 7 of the Contracts Review Act 1980, a declaration that the mortgage was void. 22 Negotiations took place between the parties. Until September 2005 Svjatoslav Rupchev continued to insist that the sums exceeding $600,000 which he had advanced to Vladimir Rupchev were secured by the mortgage. Ms Callow continued to raise pleas amounting to undue influence, unconscionability, something resembling non est factum and others. 23 On 1 September 2005, by letter to Ms Callow's solicitors, Svjatoslav Rupchev's solicitors offered to settle the matter on the basis that the sum of $600,000 previously claimed was reduced to $100,000. 24 The matter was set down for hearing on 29 May 2006. On that day the parties reached partial resolution. They agreed on judgment for possession and judgment in favour of Svjatoslav Rupchev in certain amounts referable to the loan agreement and the payments he had made to the Bank. Specifically, there was no provision for payment of any part of the $600,000 claimed by Svjatoslav Rupchev. The question of costs was reserved. The distribution of the proceeds of the sale, after payment to Svjatoslav Rupchev of the sums due to him, has been reserved for further hearing. 25 The evidence I have recounted shows two things clearly. One is that both Svjatoslav Rupchev and Ms Callow persisted, over a considerable period of time, in making claims that they ultimately surrendered. Ms Callow, for example, denied the legality of the mortgage, and raised against him the various issues I have identified above. He continued to maintain that he was entitled to enforce, against the proceeds of the sale, those sums advanced by him to Vladimir Rupchev. There may be many reasons for the compromises made. Given that the parties reached resolution, it is not possible for me to determine whether Svjatoslav Rupchev was justified in his claim in respect of the $600,000; or whether Ms Callow was justified in any of her claims. I can only infer that each received advice that the claims were, at best, doubtful. Each compromised his or her position to a significant degree. It is, as I have indicated, impossible, in the circumstances, to determine the rights and wrongs of these claims. To do so would involve litigating the proceedings that have been resolved. 26 Resolution of a claim by settlement involves, usually, a degree of compromise on the part of each party. This, usually, involves a recognition that the claim may, if litigated to a conclusion, be determined against that party. 27 In the circumstances, I am satisfied that the only just order is that each pay his or her own costs. That is the order I propose to make. Interest 28 Svjatoslav Rupchev made payments totalling about $58,000 following Vladimir's cessation of payments on the loan agreement. These amounts were paid to him following settlement and sale of the property. He now claims interest thereon. His claim is for interest at Supreme Court rates. 29 I am satisfied that he is entitled to an award of interest, calculated on the amounts paid by him, from the dates of the payments until the date on which he received reimbursement. Unfortunately (given the history of these parties) it is not possible for me to perform the calculation. The parties will have to do so. 30 An argument was advanced on behalf of Ms Callow that the rates prescribed pursuant to s 101 of the Civil Procedure Act 2005 are unduly generous to Svjatoslav Rupchev, and that, should he be found to be entitled to interest, it is at a lesser rate calculated by reference to the rates imposed by commercial financial institutions. 31 While this argument has a superficial attractiveness, I have decided it cannot be accepted. The foundation upon which it is based was not supported by evidence. So to support it would involve the parties in yet another round of dispute, that would only increase the costs to them (and prolong the agony). This litigation must be brought to a conclusion. 32 Prima facie, s 101 provides for interest at the rates prescribed. It is true that it is open to the court to make some other order, but some basis needs to be established for that to be done. No such basis has here been established. 33 The orders I make are: (1) The plaintiff and the first defendant are to pay their own costs of the proceedings. (2) The plaintiff is entitled to be paid (from the proceeds of the sale of the Normanhurst property) interest upon the payments made by him pursuant to the mortgage, at rates prescribed pursuant to s 101 of the Civil Procedure Act 2005 , from the date of each payment until the date upon which he was reimbursed therefor. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.